4 ECU as Unit of Account
  • 1 0000000404811396https://isni.org/isni/0000000404811396International Monetary Fund

Abstract

The ECU is at the center of the EMS and has a number of important functions within it. The many functions may help to explain why the ECU, a feature of a regional monetary system, is being used much more broadly as a private unit of account than the SDR, even though the SDR is a unit of account in a worldwide discretionary system of exchange arrangements. Another explanation of the comparative success of the ECU as a unit of account is that it is associated with a system of fixed exchange rates and has been relatively stable within the area in which the system operates. Nevertheless, the EMS permits exchange rates to fluctuate within not insubstantial margins around parities, and (in late 1990) within considerably wider margins for two of the currencies that compose the ECU basket. In addition, realignments of exchange rates can take place and have occurred within the parity grid, although the frequency of realignments has diminished. This development supports the observation that the EMS is approaching the ideal of a zone of monetary stability.